We often come across clients and prospective clients who complete an asset schedule with items that we do not believe should be included in an asset schedule. I’ve outlined below what we would exclude from an asset schedule:
1) Your Private Dwelling House (PDH)
Your PDH is a place to live and call home. As long as you can afford the mortgage then the current market price is largely irrelevant. If property prices go down, then you need to stay there and if prices go up, moving home will bring in a few quid that will ultimately be used to purchase your upgrade. Basically, you can’t sell a window out of your house to supplement your income.
2) Your Holiday Home
It’s for your holidays! It isn’t an investment and even those who rent out their holiday homes will tell you that they rarely make money out of the letting fees.
3) Your Car
While I’m one of the unfortunate ones that has an unhealthy obsession with cars, its common sense that a car is to get you from A to B and is a depreciating asset. In fact if you hang onto it long enough it will be worth nothing.
4) Race Horses
I’m not into Horse Racing but those in the know tell me this is one of the quickest ways to spend money and lots of it.
5) The Sure Thing
Remember those shares you bought having discussed the opportunity with your mates on a Friday evening in the pub? They seldom work out. A diversified share portfolio is a high risk investment strategy. Investing in one share isn’t an investment strategy.
6) Investing in a Private Business
While this is a little trickier than some of the others on this list, we have seen many investment portfolios come unstuck because a private investment in a local business didn’t work out. Be very careful and make sure you have rock solid legal agreements.
7) The Lotto
I’m not sure what the odds of winning are but I reckon they are long!
8) Prize Bonds
They are not investments and the odds of winning a monthly “prize” have decreased significantly in recent times.
Of course there are cases where the above examples have yielded tremendous results but then again a broken clock is also right twice a day.
Our investment philosophy is that having a diversified investment portfolio that has a long term bias gives you the best chance of achieving your financial goals. In summary:
Diversify, diversify, diversify and then stick with the plan
Co-Founder and Director
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